Ann Arbor Spark

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Prior to the current economic downturn, the number of Angel Investor groups in Michigan had more than doubled over the past three years. Much of this growth can be attributed to the efforts of the Michigan Economic Development Corporation. Skip Simms, Manager of the Pre-Seed Capital Fund, describes how Angel investment works in Michigan...

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Filed under: Angel Investing | Ann Arbor Spark | Ann Arbor, MI | Financing Innovation | Kalamazoo, MI | Skip Simms | Traverse City, MI

Angel investors are high net worth individuals having either $1M in assets or $200K in individual income. They typically make investments totaling less than $1M in any given company. Angel groups provide angels with deal flow and potential co-investors so they can spread the risk and work for any individual investment.

Currently, Michigan has seven angel groups:

• Great Lakes Angels
• Ann Arbor Angels
• Grand Angels
• Kalamazoo Angels
• Midland Angels
• Traverse Angels
• Battle Creek Angels

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As described in our last segment, the Michigan Pre-Seed Capital Fund matches equity investments by venture capitalists, angels, and others in early stage ventures. In this segement Skip Simms, the fund's manager, describes the state of venture capital in Michigan...

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Filed under: Ann Arbor Spark | Ann Arbor, MI | Financing Innovation | Skip Simms | Venture Capital

Skip makes three points:

• On a national scale, Michigan falls in the mid to lower mid tier of states when venture capital activity is measured in number of firms or assets under management. The state is attempting to improve its position with the Venture Michigan and Twenty-First Century Jobs funds.
• If a Michigan company seeks venture capital and wishes to stay in Michigan, they will most likely work with a local Michigan venture capital firm. Even if the company gets funding from out-of-state venture capitalists, those venture capitalists will want someone with local presence as an investment partner.
• Michigan venture capitalists, like venture capitalists in the rest of the country, invest incrementally, waiting to see the extent to which the initial investment is succeeding before investing more. Over the 10 year life of an investment fund, they seek to provide a return of two to four times to their limited partner investors.

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The Michigan Pre-Seed Capital Fund is targeted at early stage technology companies that need in the hundreds of thousands of dollars. Skip Simms, fund manager, explains the criteria for applying and the reason for the fund's existence.

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Filed under: Angel Investing | Ann Arbor Spark | Ann Arbor, MI | Financing Innovation | Friends and Family | Skip Simms | Venture Capital

The Michigan Pre-Seed Capital Fund is targeted at early stage technology companies that need in the hundreds of thousands of dollars. As Skip Simms, the fund's manager, explains:

• The maximum investment the fund will make is $250,000.
• The fund is a matching fund. Its contributions will always be less than or equal to those of outside investors. These investors might include angels, venture capitalists, or friends and family.
• The motivation for creating the fund came after the collapse of the first Internet bubble when angels and venture capitalists demonstrated hesitancy to invest in early stage ventures that were still trying to prove their business concept.
• People interested in the fund should apply through the nearest Michigan SmartZone where it is first reviewed. The application then goes to Skip Simms who presents it to the fund review board consisting of angels, venture capitalists, and service providers.

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• One reason that venture capitalists might be hesitant to invest in early stage companies is pressure from their own investors seeking high rates of return over a fixed time horizon.